Consider the following statement by a financial manager: "Since we are financing our new manufacturing facility 100% with equity, we must evaluate it using a higher rate of return than we would if we financed a portion of the facility with debt." Which of the following is/are correct in your opinion? Select one: a. The manager is correct because required return on equity is higher than on debt due to the higher risk of equity. b. The manager is correct because the use of funds and the source of funds are both important in capital budgeting analysis. c. The manager is wrong because the higher rate will not maximize the project's or shareholders' value. d. The manager is wrong because the appropriate discount rate depends on the use of funds, not the source. e. The manager is correct because they are relying on experience
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